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Structured Finance Litigation Blog

Deutsche Bank Files Putback Action Against WMC Mortgage and GE Capital Over $2.6 Billion in RMBS

Posted in Deutsche Bank National Trust, General Electric Co., Investment Banks/Deal Sponsors, Mortgage Originators, Trustees, WMC Mortgage Corporation

On June 25, 2012, Deutsche Bank filed a lawsuit in Connecticut federal court against WMC Mortgage LLC and General Electric Capital (GE Capital) in connection with the sale of $2.6 billion in residential mortgage-backed securities (RMBS) in 2006. In its complaint, Deutsche Bank National Trust Co., in its capacity as trustee for Morgan Stanley ABS Capital I Inc., alleges that WMC Mortgage LLC, the successor to GE’s former loan origination business WMC Mortgage Corp., breached its representations and warranties concerning the quality of the loans in the pool, including the ability of home loan borrowers to make their monthly payments and the security of the collateral backing the loans. Deutsche Bank further alleges that, based on a sampling of loans, more than 99% of the non-performing loans breached WMC’s representations and warranties, and more than 29% of the reviewed loans contained applications that misrepresented borrower income. The complaint, which alleges that Deutsche Bank suffered $650 million in losses, seeks WMC’s repurchase, or putback, of the loans that breached the representations and warranties, as well as undisclosed damages. The case is Deutsche Bank National Trust Company, Solely as Trustee for Morgan Stanley ABS Capital I Inc. Trust 2006-WMC2 v. WMC Mortgage LLC, et al., in the U.S. District Court for the District of Connecticut. Read the complaint here.